Communicating with stakeholders in a crisis : it's not enough to formulate a plan for survival when a crisis comes. A company needs to communicate often, and effectively, about how it is executing that plan.

• Author: Epstein, Michael J.
• Position: Communications

Successful business turnarounds depend largely on two elements (and perhaps a bit of luck): Dramatic change in the operating economics of the business and communicating, through every phase of the turnaround, how these changes will improve the position of all constituencies.

In good times, a company owes its primary responsibility to its shareholders. However, in troubled and potentially insolvent times, management's primary responsibility shifts to the interests of all stakeholders, including banks, bondholders, trade vendors, employees, customers and sometimes even government agencies. Management will need the support of all of these constituencies to make a turnaround successful.

In bad times, stakeholder communication becomes a critical step on the road to a company's continued survival. However, the company must first develop a coherent and comprehensive plan to fix its problems, including all operational, strategic, financial and transactional elements. This plan is the blueprint for survival, and management must go to the mountaintop and tell the world--"We have a plan, we're going to share it with you and we're going to show you how it works for you." The communications aspects of this plan are a means to an end--the end being a resolution to the crisis. The following suggestions offer proven ways to help navigate:

Open up the lines of communication to include all stakeholders, stick close to the truth and be consistent. In a crisis, the natural reaction of most executives is to hunker down and limit contact with the outside world. Yet this is usually counterproductive, since limiting information confirms the worst suspicions of creditors, lenders and investors.

The first step is to communicate proactively to limit surprises and build credibility and trust. The second step is to develop a consistent story line for all stakeholders that eliminates variations from one group to another. Sticking close to the truth is critical. This does not necessarily mean disclosing every detail, but the generalities must be credible and consistent. These points are critical, as they govern all actions in every phase of stakeholder communication.

Involve employees and customers in the communications effort. There are few limits to what you can share when in the midst of a turnaround and are fighting for one's corporate life. Your employees, as representatives of the company, are an important first line of defense with customers. A well thought-out...